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Judge says Tongass log contract cancellation was improper

Posted: Wednesday, May 31, 2000

JUNEAU (AP) -- A federal claims court has ruled that the U.S. Forest Service acted improperly when it terminated Alaska Pulp Co.'s 50-year timber contract in the Tongass National Forest.

Judge Lawrence M. Baskir issued a 14-page ruling last week that said Alaska Pulp did not violate the contract by closing its Sitka pulp mill in 1993. That was the reason given for canceling the contract, which was to run through 2011.

Alaska Pulp also claims that the federal government made damaging, unilateral modifications to the company's timber contract through the Tongass Timber Reform Act, a law passed in 1990.

Alaska Pulp is seeking $1.4 billion in damages it says it suffered as a result of the contract changes and cancellation.

The 50-year contract, signed in 1957, required the company to install the $60 million pulp plant in Sitka by 1961 to process lower-quality logs. Processing requirements are intended to promote industry within a region.

Judge Baskir ruled from the Washington, D.C. court that the contract specified that Tongass timber had to be processed before export, but not indefinitely at the Sitka mill.

''This does not necessarily mean that the pulp mill was to be the sole means of processing the wood 36 years later,'' Baskir wrote.

The contract said operations would be conducted on a competitive and commercially sound basis. Baskir said that allowed flexibility as economic conditions changed.

''To read into the 'install' clause a requirement to operate the mill for fifty years is a tremendous leap,'' Baskir wrote of the government's argument.

The ruling is a major victory for the company in a long-running dispute over conditions of the timber contract.

Alaska Pulp sued in 1986, claiming the Forest Service failed to provide economically viable timber. The two sides reached a settlement in 1990. Later that year, however, Congress passed and President George Bush signed the timber reform act, which removed provisions the company had negotiated with the Forest Service.

In 1993, in a weak pulp market, the company was running the pulp mill at a loss. Alaska Pulp announced it would suspend operations indefinitely while exploring other manufacturing uses of the Sitka mill, such as medium density fiberboard.

APC continued to operate the sawmill and logging at maximum levels allowed. Though the sawmill could not process lower-grade pulp wood, the company claimed it had already satisfied the minimum cut and processing requirements under the contract for that five-year period and had no requirement to process pulp.

After a six-month period, the Forest Service told Alaska Pulp that its mill closure had breached the contract. A termination notice was issued in 1994.

U.S. Sen. Frank Murkowski, R-Alaska, said environmental groups heavily lobbied the Clinton Administration to cancel the contract.

''As the record of the contract cancellation becomes publicly available, I suspect that we will find that one of the reasons the contract was illegally canceled is so that they would be free to develop that Tongass Lands Management Plan that ensued,'' Murkowski said.

All three members of the congressional delegation welcomed the court ruling.

''The government should not go around breaking deals,'' said Rep. Don Young. ''We all told the government decision-makers that five years ago when they broke this deal. The court told the government the same thing in this ruling.''

Sen. Ted Stevens and Murkowski said the actions by the various administrations have had a devastating effect on Southeast Alaska.

Murkowski said employment in Ketchikan, Sitka, Petersburg, Wrangell and Haines has declined by 7 percent since 1993 with the loss of 1,100 direct timber jobs.

A spokeswoman for the U.S. Forest Service said the agency had no comment on the ruling.

''This is an ongoing case,'' said Sheila McLean. ''This office won't comment on it.''

Department of Justice spokesman Charles Miller said the government will review the ruling. It has 90 days to appeal.

Marc Wheeler, a spokesman for the Southeast Alaska Conservation Council, said Alaska Pulp repeatedly polluted air and water in Sitka.

''We still think the Clinton Administration did the right thing by canceling the contract,'' he said.



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